Urban transport

The movement of populations from rural to urban areas raises several important questions regarding patterns of urban development, the choice of alternative transportation infrastructure networks, and policies for addressing traffic congestion and greenhouse gas emissions from increased energy consumption. Analysis of these issues needs to consider overall transportation demand, the cost of different modes and choices among them, how they contribute to congestion and emissions, and the potential opportunities and constraints for expanding mass transit.

Urban transportation is the main contributor of local air pollution, greenhouse gas emissions, traffic congestion, accidents and other externalities. Moreover, if extensive road investment continues to promote automobile use, instead of improving public transit systems, urban sprawl is “locked-in,” making it much harder in the future to reduce time wasted from traffic congestion and pollution from automobile fuel use.

The research program examines alternative policy instruments to reduce traffic congestion and emissions in mega-cities in the developing countries. Additionally, our research identifies appropriate policy interventions (e.g., strategic investments in transportation infrastructure) to avert the lock-in effects of road expansion on CO2 emissions.

Research outputs

"Demand side instruments to reduce road transportation externalities in the greater Cairo metropolitan area," Ian W.H. Parry and G. R.Timilsina, World Bank Policy Research Working Paper 6083, 2012.Economically efficient prices for the passenger transportation system in the Greater Cairo Metropolitan Area would account for broader societal costs of traffic congestion and accidents, and local and global pollution. A $2.20 per gallon gasoline tax (2006 US$) would be economically efficient, compared with the current subsidy of $1.20 per gallon. Removal of the existing subsidy alone would achieve about three-quarters of the net benefits from subsidy elimination and the tax. Per-mile tolls could target congestion and accident externalities more efficiently than fuel taxes, although they are not practical at present. A combination of $0.80 per gallon gasoline tax to address pollution (versus $2.20 without tolls), and $0.12 and $0.19 tolls per vehicle mile on automobiles and microbuses, respectively, to address traffic congestion and accident externalities (versus $0.22 without fuel taxes) would be most efficient. Current public bus and rail subsidies are relatively close to efficient levels in the absence of such policies; however, if automobile and microbus externalities were fully addressed through more efficient pricing, optimal subsides to public transit would be smaller than current levels.

"Impacts of Policy Instruments to Reduce Congestion and Emissions from Urban Transportation: The Case of Sao Paulo, Brazil," A. Anas and G. R.Timilsina, World Bank Policy Research Working Paper 5099, 2009.This study examines impacts on net social benefits or economic welfare of alternative policy instruments for reducing traffic congestion and atmospheric emissions in São Paulo, Brazil. The study shows that expanding road networks, subsidizing public transit, and improving automobile fuel economy may not be as effective as suggested by economic theories because these policies could cause significant rebound effects. Although pricing instruments such as congestion tolls and fuel taxes would certainly reduce congestion and emissions, the optimal level of these instruments would steeply increase the monetary cost of travel per trip and are therefore politically difficult to implement. However, a noticeable finding is that even smaller tolls, which are more likely to be politically acceptable, have substantial benefits in terms of reducing congestion and emissions. Among the various policy instruments examined in the study, the most socially preferable policy option for São Paulo would be to introduce a mix of congestion toll and fuel taxes on automobiles and use the revenues to improve public transit systems.

Rapidly increasing emissions of carbon dioxide from the transport sector, particularly in urban areas, is a major challenge to sustainable development in developing countries. This study analyzes the factors responsible for transport sector CO2 emissions growth in selected developing Asian countries during 1980-2005. The analysis splits the annual emissions growth into components representing economic development; population growth; shifts in transportation modes; and changes in fuel mix, emission coefficients, and transportation energy intensity. The study also reviews existing government policies to limit CO2 emissions growth, particularly various fiscal and regulatory policy instruments. The study finds that of the six factors considered, three - economic development, population growth, and transportation energy intensity - are responsible for driving up transport sector CO2 emissions in Bangladesh, the Philippines, and Vietnam. In contrast, only economic development and population growth are responsible in the case of China, India, Indonesia, Republic of Korea, Malaysia, Pakistan, Sri Lanka, and Thailand. CO2 emissions exhibit a downward trend in Mongolia due to decreasing transportation energy intensity. The study also finds that some existing policy instruments help reduce transport sector CO2 emissions, although they were not necessarily targeted for this purpose when introduced.

Using a nested multinomial logit model of car ownership and personal travel in Beijing circa 2005, this paper compares the effectiveness of different policy instruments to reduce traffic congestion and CO2 emissions. The study shows that a congestion toll is more efficient than a fuel tax in reducing traffic congestion, whereas a fuel tax is more effective as a policy instrument for reducing gasoline consumption and emissions. An improvement in car efficiency would also reduce congestion, fuel consumption, and CO2 emissions significantly; however, this policy benefits only richer households that own a car. Low-income households do better under the fuel tax policy than under the efficiency improvement and congestion toll policies. The congestion toll and fuel tax require the travel cost per mile to more than triple. The responsiveness of aggregate fuel and CO2 are, approximately, a 1 percent drop for each 10 percent rise in the money cost of a car trip.

This paper reviews the literature on the fiscal policy instruments commonly used to reduce transport sector externalities. The findings show that congestion charges would reduce vehicle traffic by 9 to 12 percent and significantly improve environmental quality. The vehicle tax literature suggests that every 1 percent increase in vehicle taxes would reduce vehicle miles by 0.22 to 0.45 percent and CO2 emissions by 0.19 percent. The fuel tax is the most common fiscal policy instrument; however its primary objective is to raise government revenues rather than to reduce emissions and traffic congestion. Although subsidizing public transportation is a common practice, reducing emissions has not been the primary objective of such subsidies. Nevertheless, it is shown that transport sector emissions would be higher in the absence of both public transportation subsidies and fuel taxation. Subsidies are also the main policy tool for the promotion of clean fuels and vehicles. Although some studies are very critical of biofuel subsidies, the literature is mostly supportive of clean vehicle subsidies.

This study reviews regulatory instruments designed to reduce environmental externalities from the transport sector. The study finds that the main regulatory instruments used in practice are fuel economy, vehicle emission, and fuel quality standards. Although industrialized countries have introduced all three standards with strong enforcement mechanisms, most developing countries have yet to introduce fuel economy standards. The emission standards introduced by many developing countries to control local air pollutants follow either the European Union or United States standards. Fuel quality standards, particularly for gasoline and diesel, have been introduced in many countries mandating 2 to 10 percent blending of biofuels, 10 to 50 times reduction of sulfur from 1996 levels, and banning lead contents. Although inspection and maintenance programs are in place in both industrialized and developing countries to enforce regulatory standards, these programs have faced several challenges due to a lack of resources. The study also highlights several factors affecting the selection of regulatory instruments, such as countries' environmental priorities and institutional capacities.

Ongoing urban sprawl in large cities can lead to development patterns that are unsustainable in the long run. Of particular concern is continued extensive road investments that promote automobile use over public transit systems. This locks in urban sprawl, making it much harder in the future to reduce time wasted from traffic congestion and pollution from automobile emissions. Analysis of this problem in Beijing suggests that investing in more peripheral roads is likely to lock-in traffic congestion and growing CO2 emissions. The model also suggests investments in public transportation in the city center that connect with surrounding areas would reduce average travel times, lower overall carbon dioxide emissions, accommodate more travelers, and reduce air pollution. Road expansion into peripheral areas would lead to higher suburbanization, more fuel consumption, and higher emissions. These findings hold for a wide range of assumptions, such as location choice with respect to travel time, and other aspects of consumer preferences. The practical challenge is, however, in designing policies and incentives to promote increased use of mass transit and reduced sprawl, as well as meeting the necessary infrastructure investments for public transportation.

This study reviews regulatory instruments designed to reduce environmental externalities from thetransport sector. We find that the main regulatory instruments used in practice are fuel economystandards, vehicle emission standards and fuel quality standards. While industrialized countries haveintroduced all three standards with strong enforcement mechanisms, most developing countries have yet to introduce fuel economy standards. The emission standards introduced by many developing countries to control local air pollutants follow either the EU or U.S. standards. Fuel quality standards, particularly for gasoline and diesel, have been introduced in many countries mandating 2 to 10 percents blending of biofuels, 10 to 50 times reduction of sulfur from 1996 levels and banning lead contents. Although inspection and maintenance (I/M) programs are in place in both industrialized and developing countries to enforce regulatory standards, these programs have faced several challenges in developing countries due to a lack of resources. The study also highlights several factors affecting the selection of regulatory instruments, such as countries’ environmental priorities and institutional capacities.

This paper compares the effectiveness of different policy instruments to reduce traffic congestion and CO2 emissions, using a nested multinomial logit model of car ownership and personal travel in Beijing circa 2005, The study shows that a congestion toll is more efficient than a fuel tax in reducing traffic congestion, whereas a fuel tax is more effective as a policy instrument for reducing gasoline consumption and emissions. An improvement in car efficiency would also reduce congestion, fuel consumption, and CO2 emissions significantly; however, this policy benefits only richer households that own a car. Low-income households do better under the fuel tax policy than under the efficiency improvement and congestion toll policies. The congestion toll and fuel tax require the travel cost per mile to more than triple. The responsiveness of aggregate fuel and CO2 are, approximately, a 1 percent drop for each 10 percent rise in the money cost of a car trip.

Economists typically advocate the use of policies that impose prices on unwanted “externalities.” A numerical simulation of this approach in Mexico City shows that both a higher gasoline tax and a road toll for reducing congestion in principle could generate substantial social benefits. The largest gain would come from reduced congestion, followed by local air pollution reduction. However, the toll and tax that maximized the benefits each would double the cost of driving. This is a major political obstacle, as is the practicality of implementing congestion tolls in practice. Nevertheless, significant gains could be obtained through more modest charges. A key argument for pursuing externality pricing despite the obstacles is that without it, choices among travel modes will tend to higher investment in roads relative to mass transit. Given the rapidly increasing demand for transportation infrastructure in Mexico City, the full social costs of travel should be included in evaluations of alternative infrastructure investments.